Subscribe Feed (RSS)Understanding and Knowing the 401k Contribution Limits for 2010
The 401k contribution limits for 2010 is similar to last year’s limit which is $16,500 for those who are 49 years old and below and $22,000 for those who are 50 years old and above. The limits are usually based on the rate of inflation, and it usually increase by $500. Since the inflation rate is stable, this year’s limit remained unchanged from last year’s rate. Knowing the maximum contribution amount is important so you won’t be penalized, otherwise you would have to pay the penalty on the excess amount as well as pay taxes on top of the additional contribution. Remember, these excess contributions are “non-qualified” especially in such retirement plan as the 401k. If you found out that you have exceeded the limit at a given year, you must be ale to withdraw them by April 15 of the succeeding year.
It is also important to take note that your employer may also impose a contribution limit on your retirement plan. Your employer contributions are also sanctioned not to exceed the maximum regulatory limits. For the year 2010, the total amount of contribution shared by the employee and his or her employer should be $49,000 only. The section 415 limit states that the amount should be less than the employee’s compensation.
Aside from the 401k contribution limits for 2010, there are a lot of facts that one has to know regarding his or her 401k retirement plan. Bear in mind it is always wise to be in-the-know regarding things that matters especially nowadays that we are faced with economic and financial instabilities. Keeping or securing a retirement plan is a must, this way you are assured of financial freedom in the years to come. Despite not having contribution deadlines, earlier enrollment for this specific retirement plan would also mean that you can start tax-deferred savings for your retirement sooner. Since the law does not oblige you to pay taxes on top of your contribution earnings, it would also mean that the sooner you enroll the higher gains you will get.
The next thing to take note of regarding your 401k is how you can make use of your gains or profit. You can invest on stocks. Anyhow, if you change your decision, you can easily allocate your 401k money in other forms of investment.
401k retirement plan allows the employee to decide on how much they can contribute in a month. This is referred to as the contribution percentage.
So while we are still working and earning, it is best that we allocate a part of our earnings to insurance plans such as the 401k retirement plan. Besides, nobody knows what the future may bring. If you enroll on such plans you are guaranteed that you are financially secured once you reach the retirement age.
